Experts: California not Wisconsin, but benefits unsustainable

Feb. 26, 2011

Updated Aug. 21, 2013 12:28 p.m.

1 of 1

Striking teachers in the La Habra City School District walk a picket line in December 2010. The five-day strike -- the second teacher strike in Orange County in less than a year -- was the result of pay cuts imposed by a school district that insisted it was financially in the red, in part because of the soaring costs of employee health insurance. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

Striking teachers in the La Habra City School District walk a picket line in December 2010. The five-day strike -- the second teacher strike in Orange County in less than a year -- was the result of pay cuts imposed by a school district that insisted it was financially in the red, in part because of the soaring costs of employee health insurance. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

Unlike Wisconsin, California stands virtually no chance of stripping public school teachers and other unionized employees of their collective contract-negotiating rights. But like Wisconsin, the economic downturn has put increasing pressure on state workers to accept deep concessions in their health and retirement benefits, experts say.

California is in the middle of a perfect storm – health insurance costs are rising, retirees are living longer, and the state's multibillion-dollar budget deficit is looming – and this means cash-strapped school districts will be increasingly insisting their employees bear more of the cost of their benefits, observers predict.

School districts in California last year picked up an average of 86 percent of the costs of their teachers' benefits, according to 2009-10 data from the state Department of Education. In Orange County, the ratio was even higher – taxpayers paid 93 percent of the total cost.

"The cost of benefits has been skyrocketing out of control, and many times teachers just have no idea – they don't realize how much per employee a school district and taxpayers are spending on their benefits," said Orange County schools Superintendent Bill Habermehl. "Our unions have been pretty understanding, but it's going to get tougher as time goes on. It's going to be so important that we have openness and good dialogue."

Earlier this month, Wisconsin's Republican governor triggered a national uproar when he proposed quashing the right of government labor unions to engage in collective bargaining. Gov. Scott Walker insisted he was simply trying to rein in costs, but experts say this strategy almost certainly wouldn't play out in California, despite the state's projected $25 billion budget deficit.

Wisconsin's case is a classic political standoff between Democrats and Republicans, and in California, Democrats control both the Legislature and the governor's seat and would never spring for such a plan, said David Plank, executive director of the Policy Analysis for California Education think-tank at Stanford University.

"California is in a very different place than Wisconsin and most of the Midwestern states," Plank said. "The issue that is going to come up in California is the issue of pensions and to some extent benefits. This is a state that is relatively generous to teachers and others."

Variations in benefits coverage

While Orange County school districts on average cover the vast majority of teachers' benefit costs, the amount varies by school district – anywhere from 65 percent to 100 percent.

Four O.C. districts and the county Department of Education pick up all costs, 11 others pay 92 to 98 percent, six pay 83 to 89 percent, four pay 75 to 79 percent, and two pay 65 to 66 percent. The figures are for certificated personnel, who are primarily teachers but can also include nurses, librarians, counselors and school psychologists.

Over the past decade, Orange County school districts have become increasingly aware of this financial liability and have taken drastic steps to contain it, Habermehl said.

At least half of all O.C. districts now have benefits caps, Habermhel said – limits on the amount the district will pay for benefits such as medical, dental and vision insurance. Benefit caps are key, financial consultants say, because the cost of health benefits can rise 8 to 15 percent a year.

By contrast, a decade ago, only about 10 percent of districts statewide capped their maximum payouts, said Ron Bennett, president of the Sacramento-based financial planning consultant School Services of California.

"California schools are certainly in better shape than they were 10 years ago on the cost of benefits," Bennett said.

In the Placentia-Yorba Linda Unified School District, for example, employees either pay 10 percent or close to that amount of their benefit costs, and pay 10 percent of all new benefit costs.

The district had been paying for 100 percent of new costs, but negotiated the new system several years ago, said Doug Domene, the district's assistant superintendent for business services.

"Our intent was to have all of our employees paying the same percent of health and welfare," Domene said.

Little to nothing in return

As districts head to the bargaining table to negotiate with their labor unions, all parties must be prepared to make hard sacrifices, as well as tradeoffs, officials say.

A few years ago, union leaders in South County's two largest school districts, Capistrano and Saddleback Valley Unified, each tried to improve a different element of their compensation packages during negotiations, Bennett said.

At the time, Saddleback had no cap on district-funded benefits but comparatively lower salaries – and was seeking to raise salaries.

Capistrano had comparatively higher salaries but a benefit cap – and was seeking to eliminate the cap.

Bennett, who handled fact-finding duties for both districts that year, pointed out that their total compensation packages were quite similar, just a different balance of benefits and salaries.

He said teachers couldn't have both high salaries and no benefits caps.

Now, with school funding continuing to deteriorate, districts must begin looking at slashing both salaries and benefits – and bracing for clashes with their labor unions because they can offer nothing in return.

Already, teachers in La Habra City and Capistrano Unified went on strike last year over imposed pay cuts.

In the La Habra City School District, teachers picketed for five days last December after the school board imposed pay cuts of 7 to 10.9 percent for the average teacher, more than an independent mediator's recommended 6 percent.

The district said its hands were tied, in part, by soaring health insurance costs. Indeed, teachers who wanted to remain on La Habra's most expensive family health plan took the equivalent of a 3.9 percent pay cut to stay on it.

Similarly, in Capistrano Unified, teachers picketed for three days in April 2010 after the school board imposed 10.1 percent pay cuts.

Capistrano Trustee Anna Bryson said the district did what needed to be done, but afterward it became essential that the board worked to restore teachers' trust and mend bridges.

"If what you have to offer is not acceptable (to teachers), you're going to come to the point we came to," Bryson said. "But looking forward, I have a strong sense we have cleared the path and we do stand for our word."

Capistrano Unified last month partially reversed pay cuts for all of its employees, after receiving a modest, unexpected windfall of additional funding from the state. These pay restorations were codified in the contract language that Capistrano teachers signed to end their strike.

Capistrano teachers union President Vicki Soderberg pointed out that the whole point of collective bargaining, including the impasse that led up to the Capistrano strike, was to empower teachers and give them a voice, so they won't leave the profession despite being hit with wage freezes, salary cuts and larger class sizes.

"The bottom line is you've got college-educated people who could go into other professions that pay far better," Soderberg said. "If you can't give teachers a salary that's commensurate with what they could earn in the private sector, if you have to cut their pay, then you at least give them the ability to have a say about it at the bargaining table."

User Agreement

Keep it civil and stay on topic. No profanity, vulgarity, racial
slurs or personal attacks. People who harass others or joke about
tragedies will be blocked. By posting your comment, you agree to
allow Orange County Register Communications, Inc. the right to
republish your name and comment in additional Register publications
without any notification or payment.